These days everyone understands the amount of time people can waste when they aren’t focused. The internet, social media, Netflix, and countless other apps will consume your time with endless notifications and activity unless you consciously ignore it and turn them off.
While modern technology and media has made accessing information massively better, it’s also created such a huge volume of news and data that people have forgotten how to focus on what actually matters. They’ve become overwhelmed and distracted.
Well, it’s the same in the investment world, where a lot of time and energy is spent by investors, advisers and institutions talking about and watching the latest news, event, or announcement.
Monthly and quarterly economic data, daily share market and company movements and ongoing geopolitical issues. Everyone is too focused on the short-term news cycle.
What actually matters is really quite boring and generally uneventful. So, it often gets ignored because the new sensationalist headline, exciting development, or breaking news has caught our attention.
Very little of the noise that is produced each day in the financial world will be significant enough to matter in the very long term. Yet so many people spend far too much time trying to know everything that’s going on, when a lot of it is noise. In fact, I would say, most of it is noise.
Now, to be clear, I am not saying these things don’t matter at all. I am saying they don’t matter as much as everyone thinks they do. I am saying that too many people spend a disproportionate amount of their time concerned with variables that are less important than the ones they should be paying attention to.
Of course, how we see short term movements in markets or the economy unfolding will impact whether we add to or reduce our portfolio positions. And, while it does happen, it is relatively rare that issues that appear in the daily news cycle actually change our long-term view and the companies we hold.
Overall, though, it is far more productive and profitable to spend your time on what really matters and ignore all the noise. That is the key. Understand what really matters as an investor. Then by default the rest is noise. That is where you need to be spending the vast majority of your time and focus.
Great companies, in the right areas, will deliver great returns over the long term regardless of whether markets are up or down next week, or whether inflation and GDP are higher or lower next quarter.
What really matters are the macro themes and technological trends that will play out over the next decade or two. What really matters is how the 20-40 global companies we hold in our portfolios are positioned, not for the next quarter, but for the next 10 to 15 years.
What really matters is having a high degree of understanding and conviction in those companies and trends. Then it is easy to focus on what matters and ignore the noise.
This information is of a general nature only and may not be relevant to your particular circumstances. The circumstances of each investor are different, and you should seek advice from an investment adviser who can consider if the strategies and products are right for you.
Historical performance is often not a reliable indicator of future performance. You should not rely solely on historical performance to make investment decisions.